Credit card issuers in a new world of their own
The credit card industry seems to have come of age. Until recently, they were aggressive with their marketing and in the bargain not sparing the aged, minors or the family pets. After having undergone huge financial losses which could have well been avoided, the liquidity seems to have reduced.
The credit card accountability, responsibility, and disclosure (CARD) Act (passed into a law – May 22nd, 2009). It covered various aspects such as the interest rates, fees charged, crediting payments, etc and all of this took time in order to be implemented by the card companies. The 22nd of August was the deadline to comply as per the directives.
The card issuers as well as processors have been successful in avoiding any serious deviations with regard to this. Different businesses seem to be adjusting to both the economy as well as the direct repercussions with regard to the earnings in view of the new directives.
But there is still no clarity as to how the new regulations could affect the two major cards such as MasterCard & Visa. There are new fee structures for the signature as well as the PIN and the Fed will have to finalize on the policies as well as the rules with regard to payments.
The other area of discord between the processors as well as the merchants is with regard to the fraud costs and how they could be allocated.
For long Visa and MasterCard has been locked with competition but there is speculation about the entry of newcomers and fresh technology, which could cut the competition between the two major credit card companies.
Ultimately, it is the spending patterns in developed nations that are directly responsible for the business prospects of the two processors. Since the European as well as the US consumer is under a considerable amount of strain, Visa`s growth patterns that have been projected can only be considered as the best case scenario.
Capital One Financial (COF) has long been in the loaning business to individuals. With the directives as per the new act, there are limits on the fee that the company could charge its clients. There is a change with regard to balance payments also. Earlier, when the customers made monthly payments which were over and above the minimum due COF could make decisions on the balances it could apply that payment and would most often pay off the lower rate balances. However, as per the new regulations COF will have to make payments (over the minimum due) to the balance that is the highest, thereby cutting down on the average rates on the carried balances.